A List Of Controls In The Acquisition And Payment Cycle For Inventory And Cost Of Goods Sold
Following is a list of controls in the acquisition and payment cycle for inventory and cost of goods sold. Match each control with the following activities in this cycle: (1) requisition for goods and services, (2) purchase of goods and services, (3) receipt of, and accounting for, goods and services, (4) approval of items for pay- ment, and (5) cash disbursements.
1. The receiving department electronically scans bar codes on the goods received to record quantity and visually inspects for quality.
2. Computer-generated purchase orders are reviewed by the purchasing department.
3. Management approves contracts with suppliers.
4. Management reviews payments and compares them to data such as production budgets.
5. Management requires competitive bids for large purchases.
6. An individual in a position of authority reviews the completeness of supporting documentation prior to signing a check for payment.
7. A policy exists and is enforced whereby purchase agents are rotated across product lines.
8. A requisition form is forwarded to the purchasing department by a supervisor.
9. A policy exists and is enforced whereby employees cannot pur- chase from vendors outside an authorized vendor database.
10. Controls exist to ensure that only authorized goods are received.
11. Controls exist to ensure that goods meet order specifications.
12. The receiving department prepares prenumbered receiving documents to record all receipts.
13. A three-way match is made between the invoice, the purchase order, and the receiving report.
14. Limits on the purchase of inventory can be exceeded only on specific approval by a manager.
15. Supporting documentation is canceled on payment to avoid duplicate payments.
16. Management monitors inventory and purchase levels.
17. Vendor disputes about payments are handled by individuals outside the purchasing department.
18. An agreement exists with the supplier whereby the supplier agrees to ship merchandise (just in time) according to the production schedule set by the manufacturer.